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 FINANCIAL CRISIS INQUIRY COMMISSION REPORT

IKB. Rhineland’s commercial paper investors were able to get rid of the paper, and
KfW took the hit instead—with its losses expected to eventually reach . 
The IKB episode served notice that exposures to toxic mortgage assets were lurk-
ing in the portfolios of even risk-averse investors. Soon, panic seized the short-term
funding markets—even those that were not exposed to risky mortgages. “There was a
recognition, I’d say an acute recognition, that potentially some of the asset-backed
commercial paper conduits could have exposure to those areas. As a result, investors
in general—without even looking into the underlying assets—decided ‘I don’t want
to be in any asset-backed commercial paper, I don’t want to invest in a fund that may
have those positions,’” Steven Meier, global cash investment officer at State Street
Global Advisors, testified to the FCIC. 
From its peak of . billion on August , the asset-backed commercial paper
market would decline by almost  billion by the end of .

COUNTRYWIDE: “THAT’S OUR 9/11”
On August , three days after the IKB rescue, Countrywide CEO Angelo Mozilo re-
alized that his company was unable to roll its commercial paper or borrow on the
repo market. “When we talk about [August ] at Countrywide, that’s our /,” he
said. “We worked seven days a week trying to figure this thing out and trying to
work with the banks. . . . Our repurchase lines were coming due billions and billions
of dollars.” 
Mozilo emailed Lyle Gramley, a former Fed governor and a former Countrywide
director, “Fear in the credit markets is now tending towards panic. There is little to
no liquidity in the mortgage market with the exception of Fannie and Freddie. . . .
Any mortgage product that is not deemed to be conforming either cannot be sold
into the secondary markets or are subject to egregious discounts.” 
On August , despite the internal turmoil at Countrywide, CFO Eric Sieracki told
investors that Countrywide had “significant short-term funding liquidity cushions”
and “ample liquidity sources of our bank. . . . It is important to note that the company
has experienced no disruption in financing its ongoing daily operations, including

placement of commercial paper.” Moody’s reaffirmed its A ratings and stable out-
look on the company.
The ratings agencies and the company itself would quickly reverse their positions.
On August , Mozilo reported to the board during a specially convened meeting that,
as the meeting minutes recorded, “the secondary market for virtually all classes of
mortgage securities (both prime and non-prime) had unexpectedly and with almost
no warning seized up and . . . the Company was unable to sell high-quality mort-
gage[-]backed securities.” President and COO David Sambol told the board, “Man-
agement can only plan on a week by week basis due to the tenuous nature of the
situation.” Mozilo reported that although he continued to negotiate with banks for al-
ternative sources of liquidity, the “unprecedented and unanticipated” absence of a
secondary market could force the company to draw down on its backup credit lines. 
Shortly after the Countrywide board meeting, the Fed’s Federal Open Market